Is Democracy the Best Choice for Maldives?

In the August 2007 referendum Maldivians had the choice of deciding between parliamentary form of multi-party democracy and presidential form of multi-party democracy. Rejecting multi-party democracy was not an option. Had that choice been given, history could have perhaps taken a different course.

Democracy is like the proverbial sacred cow, any criticism of which is taboo. Most educated Maldivians, ardent democrats all, would like to believe that democracy is not merely good in itself, but also valuable in enhancing the process of development.

Correlation between democracy and development inconclusive
Despite the blind trust people have in democracy, empirical studies of the correlation between democracy and development are ambiguous. Sirowy and Inkeles (1991) report a negative relationship, while Campos (1994) report a generally positive relationship between democracy and development. Przeworski and Limongi (1993) don’t believe there is any correlation between the two, either positive or negative.

Much was made of the contrast in development between the largely authoritarian East Asia and democratic South Asia over the 1960’s, 1970’s and the 1980’s. Over these three decades average economic performance, both in terms of per capita income growth and human development index, has been substantially better in the former region than in the latter.

This makes it very tempting to jump to the conclusion that authoritarian rule (the benevolent dictator) is better for development. But instead, it might be more prudent to analyze the institutional factors that underlie development.

Enforcing property rights
It is a staple of the new institutional economics literature that a basic pre-condition of development is a minimum legal and contractual structure and a set of well-defined and enforced property rights; the general presumption in this literature is that democracy is better-suited in providing this environment.
However, if one studies the history of enforcing property rights in the Maldives over the past half century, one could clearly see that property rights were far better guaranteed under Nasir’s authoritarian rule, than in the last 5 years of relatively more democratic rule. In fact, the history of enforcing landed property rights during the last term of President Gayoom has been marred by widespread allegations of corruption in litigation and non enforcement of court decisions. Such allegations were unheard of during Nasir’s regime.

Rule of law
Democracy may be ideologically more hospitable to rule of law, but it is the predictability rather than legal accountability that is really at stake here, and it is not always clear that an authoritarian regime cannot provide a framework for a predictable set of contracts. Over the last three decades, for example, the first family in Indonesia and the KMT leadership in Taiwan had provided a reasonably predictable and durable (even though corrupt) contractual environment for private business to thrive, without the procedural formalities of a democracy. This is also true by and large for the regime of President Nasir during the 60s and 70s.

On the other hand, in some democratic regimes in spite of the existence of an admirable legal contractual structure on paper, the courts are hopelessly clogged. This is true not only in countries like India, but also in the Maldives during the last 5 years.

In countries like the United States, enforcement of laws may be better than in developing countries, but the process of enactment of those laws is subject to an enormous amount of influence peddling for contributions to campaign finance. The recent bill introduced in the Maldives Majlis to enhance the tenure of resort islands to 50 years is an interesting parallel.

Populist pressure
Not all cases of public pressure are good for development either. Democracies may be particularly susceptible to populist pressures for immediate consumption and unproductive subsidies that may hamper long-run investment and growth. In the case of Maldives, building harbors and secondary schools in thinly populated islands are notorious results of such public pressure.

Criminalization of politics
A more disturbing sign of politicization of the internal organization of the government in a democracy is indicated by the systematic erosion of the independence of the police and the criminal justice system that is slowly creeping in some states of North India. A significant number of elected politicians in these states are crime bosses or their accomplices, who have figured out that once elected on a ruling party ticket they can neutralize the police who will not press or pursue.

On the other hand, in non-democratic China the local Communist Party officials have sometimes been quite responsive to local needs as the comparative study of two villages in China and India by Dr`eze and Saran (1995) show in the context of China’s far better performance in the provision of primary education at the local level.

Many Maldivians not sure if democracy is best
From the beginning of Utheemu Dynasty (since when detailed records are available) to the end of Huraagey Dynasty, Maldivians have had a unique system of governance, which though a monarchy was quite different from the run-of-the-mill hereditary monarchies of Europe and Asia. Imposed from outside, democracy was introduced quite recently in 1932. There are many Maldivians who still doubt if multi-party democracy is best for them.